Bye-bye Gangnam, cliff dancing’s here

Cliff dancing. If you thought that is a new New Year entertainment to replace the now ubiquitous Gangnam, think again. Cliff dancing is the new term to describe what market traders are indulging in at the moment, after most books for the year have been squared, taking advantage of holiday closes in bourses around the world for arbitrage, until Obama and his Republican counterparts are able to announce something or other about the fiscal cliff. According to some analysts, by the time you read this, they should have come out with something. Never mind the headlines. I haven’t met or heard from a single analyst or market trader who thinks the world will end with the US falling off any cliffs, fiscal or otherwise. It has, as they say in market parlance, been discounted for the medium term, and in the short term there’s cliff dancing to be done, and some money to be made.

Now that’s the thing that Ms Merkel and the Eurozone leaders just don’t get. And neither do Didi and the BJP and Sonia. When dealing with markets, it’s not about what you actually do, it’s about what they expect, and telling them what they want to hear. Obama’s repeated assurances that something will be done seems to have worked – markets expect political cliff dancing between violently opposed parties. But they also want to hear someone’s doing something, even if limited, about it. Like nature, they abhor a vacuum of inactivity and indecision. After all, would you bet on a sports team that is obviously not trying and given up, or one that’s fighting despite being on a bad wicket?

The New Year is when we all look back and look forward, take stock. Usually, my tribe of fellow columnists is more than happy to have an opportunity to lecture, crystal gaze, predict and forecast as fast as they can hit the keyboards. It’s a good chance to pontificate while your readers are still somewhat hungover. This year, the thing isn’t the plethora of usually contradictory New Year predictions. It’s the almost uncanny absence of any. Even the analysts and economists, whose job it is to forecast infinitesimal changes in gilts and bonds and indices are unusually muted. So, I checked back to what I was busy with last year at around this time. Well, that explains it. I’d forgotten, but apparently I was busy with a stalemated Eurozone, stagnating Britain, FDI in retail and aviation and weakening growth in India, crisis at Kingfisher, and the rise and rise of China. Oh alright. I could just recycle my last New Year column, and it wouldn’t be even remotely out of date.

And that seems to be the general consensus among forecasters for 2013. Same old, same old. There’s also an uncanny drought of ‘the year gone by’ analyses, because 2012 was, as one analyst put it, such an extraordinary year. The global economy moved a baby step forward, and two back. When you’re stuck with becalmed seas with no land in sight, you start sniffing at the wind. I’m no forecaster, but I have had to learn to sniff the wind. And the sense I’m getting is: there’s no breath of fresh air on the way, but the crew is now willing to pull out the oars and start rowing…

Not because of anything politicians may be doing, but because global businesses and markets are just fed up with waiting and have come around to accept that uncertainty is going to be the new normal, as they say. In my experience, that’s how most recessions finally end, when the people who actually make up an economy — and that ain’t politicians or bureaucrats — get fed up of staring at the walls and just get on with buying, selling, investing, making things and doing deals.

The Eurozone, thanks to Mr Draghi, is not in immediate danger of blowing up, but any resolution will take years. Nobody expects much action what with Italian elections due and German elections in September. So far, one of the biggest problems holding back a global recovery is that both fund managers and CEOs are sitting on piles of cash in zero-risk areas, afraid to splurge because of uncertainty. After all, if you’re expecting Europe to go bust, with its cataclysmic aftershocks, you’d like to keep your cash under the mattress.

There, of course, is where Eurozone and Indian leaders have palpably failed, and the Americans haven’t. It isn’t as if anyone with an iota of sense isn’t aware that deep structural reform of an economy takes years, whether it’s in India, China, Greece or the US. In Europe, they put the cart before the horse – until Mr Draghi stepped in with the ECB backstop – and kept moaning about the difficulties of rebalancing the Greek economy, and fundamental competitiveness, and so on. In India, they kept moaning about the difficulties of taking reforms through a raucous democracy. In the UK, George Osborne kept going on about restructuring the welfare state and reducing the size of government. Oh c’mon. We all know what the problems are. We live in the same world, remember?

The question is, are you trying to be a part of the solution, or are you just going to moan about the problems? The fact that the last session of Parliament in India managed to pass some reform bills — even if not the more contentious ones — and the almost immediate upswing in FII inflows shows that intentions sometime matter more than action. Be seen to be active, like Boehner and McConnell and Obama are seen to be doing, and markets will forgive you your failures. After all it’s the season for goodwill to all.